Accounting and Auditing Law in Federation Bosnia and Herzegovina

The translation of BiH legislation has no legal force and should be used solely for informational purposes.
Only legislation published in the Official Gazettes in BiH is legally binding.
THE LAW
ON ACCOUNTING AND AUDITING
OF THE FEDERATION OF BOSNIA AND HERZEGOVINA
Official Gazette of FBiH No 83/09
I. GENERAL PROVISIONS
Article 1
This Law regulates the field of accounting and auditing including attaining titles,
qualifications and licensing in the accounting profession, organisation and functioning of
the bookkeeping and accounting system, preparation and presentation of financial reports,
auditing of financial reports, establishing of the Auditing Chamber of the Federation of
Bosnia and Herzegovina (hereafter: the Chamber) and establishing a quality assurance
review
system
for
audit
firms
and
public
oversight.
Article 2
Terms used in this Law shall have the meaning as follows:
Accounting is a system providing information on the financial status, level of success,
cash flows, changes in equity, and other financial and non-financial information that are
of importance for external and internal users of financial reports;
Bookkeeping is a system that includes recording, classification and recapitulation of
business transactions, as well as safekeeping of original business documentation
providing evidence on these transactions;
Audit(ing) of financial reports is an investigation of financial reports in order to provide
an opinion regarding their objectivity and authenticity, based on all substantively
significant questions, in showing the status of assets, capital and liabilities, business
results, cash flows and changes in equity in accordance with International Accounting
Standards and International Financial Reporting Standards;
The Accounting and Auditing Commission of Bosnia and Herzegovina (hereafter:
Commission), is a body established in accordance with the Accounting and Auditing Law
of Bosnia and Herzegovina ("Official Gazette of BiH" no. 42/04);
Certified accounting technician is a person holding a certificate issued by the professional
body in accordance with Article 5 of this Law;
Certified accountant is a person holding a certificate issued by the professional body in
accordance with Article 5 of this Law;
http://www.advokat-prnjavorac.com
Statutory auditor is a person holding a license issued by the Federation Ministry of

Finance (hereafter: the Ministry), upon being issued with a certificate by a professional
body in accordance with Article 5 of this Law;
Accounting standards and auditing standards are standards, accompanying instructions,
explanations, guidelines and principles of professional ethics under Article 33 of this Law
that were published by the Commission as mandatory for the entire accounting profession
in the Federation of Bosnia and Herzegovina (hereafter: the Federation), Republika
Srpska and Brko District of Bosnia and Herzegovina (hereafter: Brko District);
Professional bodies are non-governmental, voluntary professional associations in the
Federation accepted by the Commission, in accordance with Article 11 of the Accounting
and Auditing Law of Bosnia and Herzegovina;
Certificate is a public document proving that the holder passed the exams and acquired
the appropriate professional knowledge;
License is a public document serving as a work permit for a private person or a company
issued to in accordance with this Law and International Education Standards;
Register of financial reports is a central source of information about profitability and
financial position and performance of legal persons in the Federation, set up by the
competent institution in accordance with the legislation.
Article 3
Provisions of this Law shall be applied to all business companies, including insurance
companies, microcredit companies, leasing companies, investment funds, companies
managing investment funds, broker-dealers, stock exchanges and banks, other financial
organisations, cooperatives, other profit and non-profit legal persons with head office
registered in the Federation.
Provisions of this Law shall also apply to legal persons and other forms of organisation
that legal persons with main office registered in the Federation established abroad, if the
country in question does not impose any obligation to keep financial records and produce
financial reports.
Provisions of this Law shall apply to organisational units and plants of legal persons with
main office registered outside the Federation, if the organisational units and plants are
liable
to
profit
tax
in
the
Federation.
Provisions of this Law shall also apply to beneficiaries of the budget of the Federation,
budgets of cantons, budgets of municipalities and cities and extra-budgetary funds.
Article 4
For the purpose of this Law, legal persons shall be classified as small, medium and large
legal persons depending on the indicators determined on the day of creation of financial
reports in a fiscal year according to the following criteria:
amount of income,
value of business assets,
average number of employees for the year of the financial report.
Small legal persons are legal persons that meet at least two of the following criteria:
average number of employees is below 50,
average value of business assets at the end of business year is less than BAM 1,000,000,
total annual income is less than BAM 2,000,000.
Medium legal persons are legal persons that, on the day of creation of financial reports,
meet at least two of the following criteria:
average number of employees in the year of financial report is between 50 and 250,
average value of business assets at the end of the business year is between BAM
1,000,000 and 4,000,000,
total annual income is between BAM 2,000,000 and 8,000,000.
The medium legal persons also include the ones whose value is higher than the threshold
of one of the requirements under paragraph 3 of this Article.
Large legal persons are legal persons with values higher than the thresholds defined in at
least two criteria referred to in paragraph 3 of this Article.
Apart from the legal persons under paragraph 5 of this Article, banks, microcredit
companies, savings and loans cooperative ventures, insurance companies, leasing
companies, companies managing investment funds, companies managing mandatory or
voluntary pension funds, stock exchanges, brokerage and dealership companies, and
other financial organisations are classified as large legal persons.
On the day of creation of financial reports, legal persons shall autonomously conduct
classification in line with the above stated criteria and use the resulting data as a basis for
the next business year.
Newly established legal persons shall be classified based on the data contained in
financial reports for the current business year, in proportion with the number of months
of business activity, and such data are then used for the current and next business year.
The average value of business assets shall be calculated by dividing the net sum of the
book value of business assets at the beginning and at the end of the accounting period
with number two, and average number of employees by dividing the total number of
employees at the end of each month, including employees outside the territory of
Federation, with a number of months included in the accounting period.
Reporting on classification of legal person into category of small, medium or large legal
persons, conducted in line with provisions of this Law, shall be delivered by the legal
person to the authorized institution under Article 44 of this Law along with annual
financial reports.
II. TITLES AND QUALIFICATIONS
Article 5
This Law determines the following titles in accounting and auditing profession of the
Federation:
1) Certified Accounting Technician,
2) Certified Accountant,
3) Statutory Auditor.
Testing of candidates for titles under paragraph 1 of this Article, issuing of certificates to
successful candidates and licensing (issuing of work permits) shall be carried out by the
following bodies:
1. Candidates for Certified Accounting Technicians, Certified Accountants and Statutory
Auditors shall be tested by the Commission. Testing of candidates shall be based on a
unique program for the Federation, the Republika Srpska and the District, as defined by
the Law on Accounting and Auditing of Bosnia and Herzegovina, which is entirely in
accordance with the standards and guidelines of the International Federation of
Accountants (hereinafter: IFAC). The Commission may delegate activities related to
administering the test to one or more professional bodies, with the Commission closely
monitoring the implementation of these activities;
2. Certificates for Certified Accounting Technicians, Certified Accountants and Statutory
Auditors shall be issued by a professional body under supervision of the Commission;
3. Licenses for Certified Accounting Technicians and Certified Accountants who provide
independent accounting services to third parties shall be issued by a professional body
4. Licenses for audit firms shall be issued by the Ministry;
5. Licenses for Statutory Auditors shall be issued by the Ministry.
Exceptionally, the title of Statutory Auditor shall be conferred without prior testing, at
their request, to the following: Doctor or Master of Economic Science in accounting,
auditing and business analysis, who holds the relevant academic title, or Master of
Economic Sciences, who holds the title of Certified Accountant and practical experience
of five years in accounting and finance.
In connection with points 4 and 5 of paragraph 2 of this Article, the Ministry is
responsible for supervision in the field of accounting and auditing profession, which is
engaged in providing expert services to the public.
Licensing is not required for certified accounting technicians and certified accountants
who perform accounting duties for the internal needs of businesses and other legal
persons.
The financial statement audit in the Federation shall be performed only by persons who
possess the appropriate license issued in the Federation in accordance with this Law.
Audit reports shall be provided only by audit firms that hold licenses issued in the
Federation in accordance with this Law.
Acquiring, qualification, recognition and validation of qualifications
Article 6
In the accounting and auditing profession the Federation shall apply a unique program for
acquiring of titles and qualifications valid in entire Bosnia and Herzegovina (hereafter:
the Programme).
The Programme shall be determined by the Commission in accordance with IFAC
standards and guidelines and it shall implement it in cooperation with professional
bodies.
Persons who join the accounting and auditing profession under Article 5 Paragraph 1 of
this Law may acquire statutory titles only if they fulfil requirements as determined by the
Commission.
New candidates for the professional titles under Article 5(1) of this Law shall fulfil
educational, practical experience, training and examination requirements as determined
by the Commission.
Article 7
A professional body defined by this Law, in cooperation with the Accounting and
Auditing Commission of BiH, shall implement a unique programme for acquiring of
titles and qualifications in the accounting and auditing profession in the Federation.
The professional body shall be obliged to adopt regulations defining conditions, method
and fees for acquiring of titles in accounting and auditing profession, qualifying and
professional development of accountants and statutory auditors, permanent training,
quality assurance reviews of its members, and issuing of certificates for all titles in the
profession, as well as licences for titles in the field of accounting.
Upon obtained opinion from the Ministry, the Government of the Federation of Bosnia
and Herzegovina (hereafter: the Federation Government) shall issue its approval to the
regulations defining conditions, method and fees under paragraph 2 of this Article.
Professional bodies are responsible for establishing and implementing permanent
professional training of their members in accordance with international educational
standards, and keeping records on the basis of which it proves that they fulfil
requirements and criteria for permanent training as determined by the Commission.
Professional bodies in accounting and auditing profession which are registered in the
Federation shall cooperate with the Commission on all matters governed by this Law.
Competences of professional bodies shall be as follows:
implementing the program for the national qualification,
implementing permanent training
keeping records and issuing certificates of attendance at a minimal number of hours of
permanent training in the accounting profession necessary for the renewal / extension of
the license by holders of professional titles defined by this law,
governing the qualifications and professional development in accounting and auditing
profession and checking qualifications of the members,
giving expert opinions to its members and, at a request, to third parties regarding the
practical application of International Accounting Standards.
Article 8
The service of training of candidates for the accounting profession in accordance with the
Program can be provided by any legal person, professional body or educational

institution from Bosnia and Herzegovina, which meets the requirements determined by
the Commission.
Upon completion of the training, the organizer of the training shall issue to the
participants a certificate of attendance, which includes information on the number of
hours and program of the training. Attending the courses of training is not mandatory for
candidates,
but
taking
the
exams
is
obligatory
for
certification.
Article 9
Any person to whom a certificate or license was issued in the other Entity or Brcko
District shall be entitled to perform these activities in the Federation, provided that the
Entity or District adopted a law or regulation which provides equivalent recognition of
certificates and licenses issued in the Federation.
Persons and companies that possess a certificate and license in accordance with the
requirements of the Law on Accounting and Auditing of Bosnia and Herzegovina, the
Republika Srpska and the Brcko District shall be considered to be qualified to obtain the
appropriate license in the Federation and to perform audits in the entire territory of
Bosnia and Herzegovina without requiring additional examinations, training or
experience. Such a person or company shall file to the Ministry a request for licence with
a proof that they meet the requirements defined by this Law.
Article 10
Persons who possess a certificate issued by authorized bodies (i.e. associations) outside
the territory of Bosnia and Herzegovina may seek recognition of qualifications, after
proving that they meet requirements of IFAC in the country where they acquired the
qualifications as well as to have the required level of education, work experience,
knowledge of legislation and tax systems of the Federation.
Recognition of qualifications shall be performed by a professional body meeting
requirements and following procedures prescribed by the Commission.
Foreign documents shall be recognized after checking the applicants knowledge of local
legislation required to perform audits and / or accounting. Knowledge shall cover the
legislation applicable to areas identified in a decision of the Commission, and testing
shall be made in one of the official languages of the Federation.
III. SYSTEM OF ACCOUNTING AND BOOKKEEPING
The organisation and functioning of accounting system
Article 11
Pursuant to their by-law, legal persons shall define organisation of the bookkeeping in a
way that ensures comprehensive records keeping, and also detecting and prevention of
falsely recorded business events, regulate internal accounting control procedures,
determine accounting policies, determine persons responsible for legality and accuracy of
occurrence of business events, as well as creation and control of accounting documents
related to such events, determine flow of accounting documents and define deadlines for
their submission for further processing, determine procedures for preparation, compiling
and presentation of financial reports, prescribe procedures for collecting, processing and
presentation of data related to preparation and creation of annual reports on performance,
and financial data for statistical, taxation and other purposes, and regulate other issues of
importance for establishing efficient bookkeeping and accounting system in the legal
person.
The bookkeeping system shall be based on the principle of correct, true, reliable,
comprehensive, timely and individual recording of business operations and International
Accounting Standards (hereafter: IAS).
Article 12
All legal persons covered by this Law that carry out economic activity in the Federation,
are obliged to keep account books and records that provide sufficient, adequate and
complete evidence of their transactions.
Responsibility for financial reports of the legal person shall be held by the person
authorised to represent the legal person.
The person referred to in paragraph 2 of this Article shall ensure entering of accounting
and bookkeeping records in account books based solely on the documentation produced
for the particular transaction.
Article 13
Legal persons shall adopt a by-law on organization of accounting information system to
determine the way of receipt, formation, movement, disposal and storage of documents as
well as of procedures, methods and techniques of keeping account books (bookkeeping),
the form of books themselves, the components of account books, relevant deadlines for
entering certain types of data (bookkeeping), updating of bookkeeping, disposal and
storage of account books, inventory lists and deadlines, and the calculation method of
calculating depreciation, the method and terms of financial reporting, as well as other
procedures and methods which are necessary for a reliable and fair presentation of
financial statements.
Accounting documents
Article 14
An accounting document shall be written evidence or electronically stored record of a
business event, which was signed by the person authorized for the preparation and control
of accounting documents, and serves as a basis for entering in the ledgers.
An accounting document shall be a document transmitted by facsimile, a photocopy of
original document or an electronic document if it states the place of storage of the
original document/reasons for the use of copy, and if it is signed by the responsible
person or a person authorized to do so.
Article 15
The content of the accounting document must clearly and credibly demonstrate the nature
and extent of changes (purchase, quantity, price, total amount), the character of an
accounting change in accounting and technical terms (buying for cash or on credit),
technical characteristics (date of purchase, due date etc.) with the possibility of timely
oversight.
An accounting document shall be deemed any credible accounting document based on
which a third parties that did not participate in a business event can determine the nature
and scope of the transaction definitely without any doubt.
By signing an accounting document a person responsible or authorized to represent the
legal person shall guarantee that it is authentic and correct.
Preparation of accounting documents
Article 16
Accounting documents shall be drawn up for an event having occurred and relating to the
business of legal person and having reflected into a change in the accounts of assets,
liabilities, equity, revenues and expenditures.
Accounting documents can be of external and internal nature and are prepared in the
required number of copies.
External accounting documents are those that have been received by the legal person
from outside, in business relationships with third parties that have drawn them up
(invoices, statements of cash changes in bank accounts, notices of granting cash
discounts, reports on the calculated interest, bills of lading, insurance documents,
dispatch documents, delivery tickets etc.).

Internal accounting documents are drawn up within the legal person and are used for
documenting all changes in assets and liabilities according to the sources of funds
(receiver documents, dispatch documents, records, inventory lists, documents on the
return, write-off, depreciation and changes in price, orders for cash collection and
payment, payrolls, requisition slips for materials, semi-finished products, products, tools
etc.).
Instead of signature of responsible or authorized person to represent the legal person,
accounting documents prepared as an electronic record may contain the name or other
distinctive mark of the person authorized to issue the accounting document or shall be
signed in accordance with the Law on Electronic Signature ("Official Gazette of BiH ",
No. 91/06).
Persons who draw up and receive accounting documents shall transmit any signed
document and other documentation in connection with a business change immediately
after drawing up or receipt thereof or within three days of the business change occurrence
or receipt thereof at the latest.
Control of accounting documents
Article 17
Before entering in account books any accounting document shall be controlled in terms
of formal, substantive and computation correctness and certified by authorized persons in
the legal person.
Control of the formal validity of accounting document shall be based on whether the
document has been prepared in accordance with the regulations, IAS and by-laws of the
legal person.
Substantial control of accounting document shall establish the essential validity of the
document, which consists of inspection whether the business change actually incurred to
the extent as indicated.
Control of the computational accuracy of accounting documents shall involve
computational inspection of mathematical operations of division, multiplication, addition
and subtraction, based on which results were obtained on a document.
Invalid documents shall be returned to the appropriate person/department in order to
eliminate deficiencies.
Article 18
Corrections in the text or numbers in the accounting documents shall not be done in a
way that cast doubt on the credibility of accounting document.
A correction shall be done with a strikethrough by the person who issued the accounting
document and who shall also make the correction on all copies of the accounting
document issued, certifying it by his signature and affixing the date of making the
correction.
Financial accounting documents shall make an exception and shall not be corrected but
cancelled and new ones shall be issued.
Article 19
A properly disposed of and approved accounting document shall be forwarded to the
accounting department where, based on it, an order for its entry shall be issued and the
information shall be entered in the books applying the accounting method.
After inspection of accounting documents received, persons who keep account books
shall be obligated to record accounting documents in the account books next day or
within eight days of receipt of accounting documents at the latest.
Account books
Article 20
Account books shall be uniform records on the status of and changes in assets, liabilities
and equity, as well as realised incomes and expenditures.
Account books shall be kept for a business year and are the basis for annual and semiannual financial statements.
Account books shall be kept based on the double-entry bookkeeping system, respecting
the principles of neatness, real-time processing, document content and credibility.
Account books may be kept on loose sheets, in bound form or transferred to some of the
electronic media, so that they can then be printed or displayed on the screen, as required.
Account books shall be: journal, general ledger and subsidiary ledgers.
A journal shall be a business record for entering of business events occurring during the
accounting period, in chronological order, according to the time of occurrence. A journal
can be established as a unique account book or several books that are designed to record
changes in separate groups of balance or off- balance sheet items.
Article 21
Transactions shall be recorded on the analytical accounts whose contents and belonging
to balance sheet correspond to the statutory framework chart of accounts.
The framework chart of accounts and contents of the accounts in the Chart for legal
persons shall be prescribed by the Minister of Finance (hereinafter: Minister).
A detailed chart of accounts shall be prescribed by a by-law of legal person and shall be
compliant with the statutory framework chart of accounts.
A general ledger is a set of all accounts that were opened during the fiscal year. The
general ledger shall include pre-prepared accounts that, in accordance with the needs of
the legal person, provide information for annual financial statements.
General Ledger consists of two separate parts:
balance sheet records and
off-balance sheet records.
The subject of bookkeeping processing in the general ledger with regard to balance sheet
records shall be business events that have the following characteristics:

impact of business events can be expressed in monetary terms,
changes made by business events affect the items of assets, liabilities, equity, costs,
expenses, revenues and profit/loss,
the occurrence of business event can be proved by credible accounting document.
General ledger off-balance sheet records shall include certain business events that did not
affect changes in the balance sheet and income statement, but provide additional
information about using other people's property, future contingent liabilities, the control
of individual business enterprises and informing.
When applying the methods of electronic data processing, the general ledger must be
organized so that control of bookkeeping can be performed.
Article 22
As a rule, subsidiary ledgers shall be kept separately.
In the subsidiary ledgers in which records of tangible property are kept, assets shall be
measured in quantities and monetary amounts.
Other subsidiary ledgers that complement the information on items in the general ledger
or provide any other details shall be as follows: a cash book (journal), a book of incoming
invoices, a book of outgoing invoices, a book of foreign exchange, a book of checks
issued, a book of promissory notes payable, a stock register, a stake register etc.
Cash transactions that occur on the basis of cash and other valuables that are kept in the
cashiers office of the legal person shall be entered in the cash journal. The cash journal
shall be closed at the end of each working day and delivered to the accounting
department the same day and no later than the following day.
Keeping the account books
Article 23
The information shall be entered in account books on the principle of occurrence of
business events, and based on credible accounting documents.
Account books shall be opened at the beginning of the business year on the basis of the
previous year's balance sheet or opening balance sheet of newly established legal persons
on the date of acquiring the status of legal person and making status changes in
accordance with Article 36 of this Law.
Those items that are not found in the opening balance sheet shall be introduced in the
ledgers during the year when a business event occurs, based on credible accounting
document.
Account books shall be kept so as to ensure:
control of the information,
accuracy of data entry,
data storage,
use of data,
possibility to view the sales turnover situation and the general ledger accounts,
an insight into the time occurrence of completion of entries of business events.
Subsequent correction of the entered data shall be made as a new accounting item so that
it affects the change stemming from the differences with previous data.
Business events occurring between the balance sheet date and the date of registration in
the register shall be included in the account books of the previous legal person or the new
legal person, which is determined by a decision on the status change.
.Article 24
A by-law of the legal person shall set forth the requirements that the person who keeps
account books, prepares financial reports and who is a co-signatory of the financial
statements in accordance with Article 37 of this Law shall meet in terms of academic
qualifications, work experience and other requirements, as well as its responsibility for
real-time processing, neatness and authenticity of account books.
A legal person may entrust bookkeeping for a fee to a contractor such as other legal
person or entrepreneur registered to provide accounting services, which has employed
persons to keep account books provided that archiving and retention of documents are
ensured at its head office.
Paragraph 2 of this Law does not apply to banks and other financial organizations,
insurance companies, providers of financial leasing, pension funds, open funds for
corporate investment banking, stock exchanges and broker - dealer companies.
An inventory of assets and liabilities
Article 25
At the beginning of business activity but also at least once a year a legal person shall use
the balance of the last day of the business year or some other accounting period in line
with this Law and make an inventory of assets and liabilities in order to determine the
actual balance, and to harmonise the balance recorded in account books with actual
balance.
Legal persons under Article 3 of this Law as well as legal persons and parts of legal
persons engaged in activities abroad, if the foreign regulations for legal persons and their
parts do not prescribe the obligation of keeping separate accounting, as well as submitting
and auditing of annual financial statements, shall make inventories of assets and
liabilities at least once in a year and not later than the end of the current fiscal year.
A legal person in which there are borrowed assets shall make a separate inventory for
each legal person to whom the property belongs and send them a copy of the inventory
list on which these funds are listed. The legal persons whose assets are shall include these
inventory lists in their inventory documentation.
An inventory of assets and liabilities shall be made during a fiscal year in the following
cases: changes in prices of products and goods, status changes in accordance with the
Law on Business Companies (Official Gazette of Federation BiH ", no. 23/99, 45/00, 2 /
02, 6 / 02, 29/03, 68/05, 91/07, 84/08 and 7 / 09) - merger, acquisition or division opening of bankruptcy or liquidation procedure being initiated.
In these cases, the inventory shall be carried out under the date of status or other changes.
Legal persons that are subject to status or other changes shall make financial statements
for the period from 1 January to the date of status change or other changes.
The inventory shall be made during a year due to transfer of duty and does not relieve the
legal person from the obligation to make an inventory of assets and liabilities on 31
December of the current year.
Legal persons in the process of bankruptcy or liquidation are not obliged to make an
inventory on 31 December. These legal persons shall conducted inventory of assets and
liabilities on the date of opening the bankruptcy proceedings or liquidation procedure
being initiated.
Exceptionally, a legal person can provide for longer periods of making an inventory of
assets in libraries, such as books, photographs, films, archived materials etc., provided
that these periods can not be longer than five years.
Article 26
A by-law and the Decision on Inventory shall determine the procedure for making an
inventory of assets and liabilities (appointment of the Commission, manner and terms of
making the inventory, the manner to adjust the book value to the actual situation).
In order to make an inventory of assets and liabilities, a legal person shall appoint a
commission for inventory. In determining the composition of commission it should take
into account that persons who are physically or financially responsible for the assets that
are listed and their immediate superiors may not be appointed to the Commission for
inventory of these assets.
When an inventory of assets and liabilities is made before 31 December the Commission
for inventory shall enter subsequently into the inventory lists the information about the
changes that have occurred between the date of making inventory and 31 December of
the current year on the basis of accounting documents and making adjustments and
crosscheck of books and actual situation on 31 December of the current year inclusive.
The information from the books shall be entered in the inventory lists not by people
working in the accounting department but the Commission for inventory.
At the end of the inventory making, the Commission for inventory shall draft a report on
the inventory made, identifying surpluses and deficits, and submit it for consideration to
the body responsible to consider the results of inventory made and to decide on the
inventory no later than 15 days after the expiration of the fiscal year.
Calculation of depreciation
Article 27
At the end of the financial year the final calculation of depreciation shall be prepared.
The preparation of the final calculation of depreciation shall be based on the actual state
as determined on the basis of inventory list.
Fixed assets shall be written off systematically applying annual depreciation rates
resulting from the estimated useful life of fixed assets or using depreciation quotas
(annual depreciation) determined on the basis of the planned use of fixed assets.
A legal person is entitled to accelerate depreciation of fixed assets under the conditions
set forth in the legislation governing the profit tax.
Reconciliation of receivables and liabilities
Article 28
Before making the financial statements legal persons shall reconcile mutual receivables
and liabilities as evidenced by appropriate accounting documents.
Before making the financial statements a creditor shall provide a debtor with a list of
unpaid bills.
Before making the financial statements the current liabilities and receivables shall be
reconciled (balance confirmation). Accounting data of legal persons that will be entered
and confirmed with proper accounting document a form of statement of outstanding
bills shall be used as evidence of the existence of certain balance of assets and liabilities.
A confirmation recipient shall respond to the confirmation and reply to the sender:
debtor, creditor or its auditor within eight days.
The balance of receivables and liabilities shall be determined on 31 December of the
current year.
Legal persons shall produce notes to explain the individual situation of bad and stale
debts and plan activities and the manner to solve them.
Closing of account books and determining the financial results
Article 29
Account books shall be closed after entering all business changes and computations at the
end of the fiscal year no later than the deadline for submission of financial statements as
well as in cases of status changes, dissolution and other cases in which it is necessary to
close the account books.
Subsidiary ledgers that have been used for more than one year shall be concluded by the
termination of their use, except the inventory book, which shall be closed with the
alienation of the assets.
If the books are kept as electronic records, the general ledger shall be protected after the
closure at the end of the financial year in a way that no modification of some or all of its
parts or sheets can be made, it being printable at any time and signed with electronic
signature in accordance with the Law on Electronic Signature or shall be printed on paper
and bound in a way that is not possible to modify some or all of its parts or sheets and
shall be signed and certified by a person authorized to represent the legal person and
eventually archived.
Article 30
At the end of financial year account books shall be closed, then on the basis of the
account books the state of assets, liabilities, capital and financial results with revenues
and expenditures for the accounting period to which this result applies shall be
established.
A legal person shall distribute the profit or loss in accordance with the provisions of the
Law on Business Companies and this Law, its own by-law and decisions of the
competent authority.
Method and time limits of accounting documents, business records,
reports and other documentation
Article 31
Accounting documents shall be retained in the original physical form, in the form of
electronic records or on microfilm, and are evidential basis of account books.
Accounting documents shall be stored in folders and binders after the annual accounts
and audit and then surrendered to the central archive of legal person, with an official
record being taken.
Accounting documents, account books and financial reports shall be kept in the premises
of the legal person/another legal person entrusted with bookkeeping.
If the books are kept electronically, along with memorized data, memorizing of the
application software shall be ensured so as to make the data available for control.
At the institution of liquidation or bankruptcy proceedings, accounting and financial
records shall be surrendered to the liquidation or bankruptcy receiver, with an official
record being taken.
The documents that are retained permanently are: payrolls or analytical records of pays in
connection with the payment of contributions, sales contracts under which the acquisition
of property was made, the annual statements of accounts, financial statements,
consolidated financial statements, audit reports and all internal documents affecting
financial performance.
Accounting documents on the basis of which the data were entered into the journal and
ledger shall be retained for at least eleven years.
Accounting documents on the basis of which the data entered in the subsidiary ledgers
shall be retained for at least seven years
Article 32
The general ledger and journal shall be retained for at least eleven years and subsidiary
ledgers for at least seven years.
Periodic balance sheets, documents on payments through authorized financial institutions
shall be retained for at least five years.
Annual reports shall be retained in their original form eleven years after the expiration of
the fiscal year.
Subsidiary calculations, sales and control blocks etc. shall be retained for two years.
Audit firms shall retain the documentation on the basis of which an audit was performed
for six years.
A deadline for retention of accounting documents and account books shall start on the
last day of the fiscal year to which the account books and data from documents entered
into it relate.
IV. FINANCIAL REPORTS
Standards and rules
Article 33
Accounting standards of financial reporting shall be principles and rules for preparing
and presenting financial reports required from all legal persons under Articles 3 and 4 of
this Law and shall include:
1. IAS and International Financial Reporting Standards (hereinafter: IFRS)
2. International Accounting Standards for Public Sector (hereinafter: IASPS),
3. Accompanying instructions, explanations and guidelines issued by the International
Accounting Standards Board (hereinafter: IASB),
4. International Accounting Standards for small and medium enterprises published by
IASB.
Notwithstanding paragraph 1of this article and till publication of IASPS, budget users
and extra-budgetary funds shall apply special regulations for budget users and extrabudgetary funds in the field of accounting and auditing in the public sector of the
Federation.
Article 34
Auditing standards and principles of professional ethics of professional accountants and
auditors to be applied throughout the Federation shall be:
International Standards on Auditing (hereafter: ISA), issued by the IFAC,
Code of Ethics for Professional Accountants issued by IFAC,
All the instructions, explanations and guidelines issued by IFAC.
Financial Reports
Article 35
A legal person shall compile and present public financial reports for the business year in
the period between 1 January and 31 December of the current year with parallel data on
the previous year.
Exceptionally, with the approval from the minister, a legal person that is a subsidiary of a
parent company with head office located abroad that has the business year different from
the calendar year may compile and present financial reports for the period different from
the period referred to in Paragraph 1 of this Article.
A legal person that went through the process of status change shall compile its financial
reports on the day of that status change.
Business changes occurring between the dates of balance sheet and entering into the court
register shall be recorded in account books of the previous legal person or new legal
person, which is determined in the decision on status change.
Financial reports shall be compiled also in case of initiating, or termination of bankruptcy
procedure, that is, liquidation procedure of a legal person.
Article 36
Annual financial reports shall include:
Balance sheet Report on financial situation at the end of a period,
Income statement Report on total result for that period,
Cash flow statement Report on cash flows,
Statement on changes in equity and
Notes to financial reports.
As an exception to provisions of paragraph 1 of this Article, small legal persons shall
present their annual reports through:
Balance sheet Report on financial status at the end of a period and
Income statement Report on total result for that period.
Together with the annual financial reports, users of financial reports shall also be
presented with a special report made in accordance with a request from Federation
Institute of Statistics.
.
Article 37
Responsibility for financial reports of the legal person shall lie with the person authorised
to represent the legal person, registered in the court register.
Financial reports of the legal person, including the ones printed from a computer shall be
signed and stamped by a certified accountant who has the title of "certified accountant, "
his name, and the number of valid license, except for certified accountants under Article
5(6) this Law. At the same time the financial reports shall be signed by the person
authorised to represent the legal person recorded in the court register who files the
financial reports that are stamped with the stamp of the legal person filing the financial
reports.
Article 38
Legal persons classified as large and medium shall compile and present semi-annual
financial reports, that is, financial reports prepared for the accounting period from 1
January to 30 June.
Regardless of the category they belong to, according to provisions of Article 5 of this
Law, legal persons having their securities traded on capital markets or under preparation
to be released into these markets, shall compile and present semi-annual financial reports
if such obligation is provided for in the legislation respecting securities.
A semi-annual financial report shall include:
Balance sheet Report on financial position at the end of a period,
Income statement Report on total result for the period,
Cash flow balance Report on cash flows,
Statement on changes in equity, and
Notes to financial reports, made in line with International Accounting Standard 1
Presentation of Financial Reports or International Accounting Standard 34 Periodical
Financial Reports.
Article 39
The Minister shall define contents and form of financial reports that are prepared and
presented in line with this Law.
Legal persons that keep books by the means of automatic data processing may submit
financial reports on a statutory form printed on computer provided that it submits
identical information in an electronic medium together with such forms. Account books,
financial statements and other financial information presented by the person to whom the
provisions of this Law apply shall be expressed in monetary unit and in the languages
officially used in the Federation.
Annual business reports
Article 40
Legal persons shall prepare annual reports on their business operations showing an
objective review of business operations of the legal person and its financial position,
including description of main risks and threats they face, and measures undertaken to
protect the environment.
An annual report on business operations shall contain:
all important events that occurred from the end of business year until the day of delivery
of financial report,
evaluation of the expected future development of the legal person,
the most important activities related to research and development,
information on buy-off of equity stocks and shares,
information on business segments of the legal person,
financial instruments used, if of importance for evaluation of financial position resulting
from business operations and financial performance of the legal person,
goals and policies of the legal person regarding financial risks; as well as risk protection
policies for each planned transaction that requires protection and,
exposure of the legal person to price risk, credit risk, market risk, solvency-related
currency risk and other risks affecting business activity of the legal person.
Article 41
Annual reports on business operations of large legal persons and legal persons having
their securities traded on a regulated securities market shall also contain a review of
applied rules of corporate management.
As an exception to provisions of Paragraph 1 of this Article, small legal persons are not
obliged to prepare an annual report on business operations; they shall indicate the
information about the purchase of own shares in notes to financial statements.
Consolidated financial report
Article 42
In accordance with the Law on Business Companies, a group of linked legal persons that
form one legal person shall compile consolidated annual financial statements.
The consolidated financial statement shall be a financial statement of a group of legal
persons connected so that they make an economic unit in which there are separate
internal relations between these persons based on equity, assets and liabilities, revenues
and expenses where a certain person (the parent) has the right to govern the financial and
business policies.
Article 43
In preparing the consolidated financial statements legal persons shall abide by the rules
and procedures of the annual consolidated financial statements, which are regulated by
IAS and IFRS.
The obligation to produce consolidated financial statements shall arise in the first month
after the month in which the linked legal persons status was gained.
The obligation to produce consolidated financial statements shall cease at the end of the
month in which the linked legal persons status ceased to exist.
The legal person in the group that is a parent company shall prepare consolidated
financial statements and submit them to the authorized institution under Article 44 of this
law. The consolidated financial statements shall be made once a year, showing the state
of business results at the end of the year.
Filing of semi-annual and annual financial reports and business annual reports
Article 44
Semi-annual financial reports under Article 38 and annual financial reports under Article
36 and annual reports on business activity under Article 40 of this Law shall be submitted
to the authorized institution, founded by a special law, which carries out the control and
processes financial statements, and keeps the Unified Register of financial statements.
The semi-annual financial reports shall be submitted no later than 31 July of the current
year.
The annual financial report and the annual business report shall be submitted not later
than last day of February of the current year, for the previous year.
Legal persons that prepare and present consolidated financial reports under Article 42 of
this Law shall submit these reports not later than the last day of April of the current year
for the previous year.
The deadline for filing an audit report accompanied by financial statements that were
subject to auditing shall be the end of the current year for the previous year.
A legal person shall submit, along with the reports, the decision on establishing the
annual financial statements by the competent authority and a decision on the proposal of
distribution of profits or covering of loss. A legal person who prepares financial
statements in accordance with Article 35 of this Law shall submit annual financial reports
within 60 days from the date of a status change, initiation of the bankruptcy or liquidation
procedure and for other business years within 120 days from the date of expiry of the
fiscal year.
Exceptionally, legal persons which were registered in the current financial year and
which, after registration, until 31 December of the current financial year, had no other
changes in their account except the payment of compulsory deposits, shall not submit the
financial statements, noting that such persons shall inform the authorized institution
referred to in paragraph 1 this Article of these facts by filing the Statement of inactivity
for the previous financial year by the end of February of the current year.
Article 45
The authorized institution shall process the data taken from financial reports referred to in
Article 44 of this Law in a way appropriate for evaluation of property, income and
financial aspects of legal persons.
Data referred to in Paragraph 1 of this Article shall be public and available to all legal
and natural persons.
Data referred to in Paragraph 1 of this Article shall be sent to the Ministry within 60 days
upon expiry of deadlines for submission of financial reports, defined in Article 44 of this
Law.
At the same time, the authorized institution shall send data on legal persons who failed to
act in accordance with provisions of Article 44 of this Law.
Oversight
Article 46
The Tax Administration of the Federation of Bosnia and Herzegovina (hereinafter: the
Tax Administration) is authorized to oversee any legal persons operations for the
purposes of checking whether the activities of relevance for the organization and
functioning of the accounting and auditing system are performed in accordance with the
provisions of this and other relevant laws and by-laws thereof, not being authorized to
oversee the application of IAS and IFRS. Oversight shall also be exercised by other
authorities if they are authorized to oversee activities of individual legal persons to which
provisions of this Law apply.
Oversight shall also be exercised by authorized persons of the Tax Administration in the
following manner:
monitoring, collecting accounting documents, account books, annual financial statements
and tax returns and statistical reports (analysis of financial statements),
checking the system which the taxpayer applies to processing data related to accounting
operations and
direct supervision at the taxpayers.
Article 47
At the end of the procedure of supervision the Tax Administration may take the following
measures:
make a decision ordering the elimination of irregularities and
file misdemeanor or criminal charges.
The legal person subject to this Law where an oversight is performed may file an appeal
with the Ministry against a decision under paragraph 1(1) of this Article, within 15 days
of receipt of the decision. The Ministry shall decide on the appeal within 15 days of
receipt of the appeal. The appeal shall stay the execution of decision. An administrative
dispute may be instituted against the decision of appellate authority by filing a complaint
with the Supreme Court of the Federation of Bosnia and Herzegovina.
Article 48
A legal person shall enable the authorized person to exercise oversight of all accounting
documents, ledgers, annual financial statements and other fiscal and statistical reports and
systems used for data processing.
At the request of the Tax Administration a legal person shall submit copies of documents
or financial statements under paragraph 1 of this Article.
A legal person shall provide authorized persons with adequate rooms in which they can
freely and without the presence of other persons inspect accounting operations.
At the request of an authorized person, persons authorized to represent a legal person and
employees who perform accounting tasks shall produce all accounting documents,
ledgers, annual financial statements, tax returns and statistical reports and other
information on accounting jobs essential to conduct oversight and compile a written
report or respond and provide oral testimony if required by Tax Administration
V. FINANCIAL STATEMENTS AUDITING
Auditing
Article 49
Auditing is a procedure of checking and evaluating financial statements, information and
methods used in compiling financial statements, on the basis of which a professional and
independent opinion shall be given on whether the financial statements express truly and
objectively the financial situation, business results and cash flows of a legal person, in
accordance with the International Accounting Standards, or International Financial
Reporting Standards and other regulations in the Federation in order to protect the public
interest in a public presentation of financial statements.
An audit of financial statements shall be performed in accordance with the law and ISA
with respect for the Code of Professional Ethics for auditors and rules of the auditing
profession, and other rules and regulations governing this area.
The financial statements and consolidated financial statements of legal persons classified
as large and middle-sized, and financial statements of legal persons whose securities are
marketed or in preparation for their emission in organized securities market shall also be
subject to obligatory auditing.
Financial statements of legal persons shall also be subject to the obligatory auditing if it
has been prescribed by their particular regulations defining their business operations.
Legal persons that are classified into small legal persons pursuant to Article 4 of this Law
may decide to have their financial statements audited in accordance with the provisions
of this Law.
Audit Firms
Article 50
All types of auditing shall be carried out by firms approved by the Ministry.
Audit firms shall be established in accordance with provisions of this law and laws
regulating the issues concerning the establishment, operation and termination of
operation of business companies.
Licences to the audit firms approved in accordance with the provisions of the relevant
Laws on Accounting and Auditing of Republika Srpska and Brcko District shall be issued
in accordance with the conditions of mutual recognition of qualifications in the entire
territory of BiH, defined by the Accounting and Auditing Law of BiH.
A majority of the voting right and a majority share in capital in an audit firm shall be
owned exclusively by statutory auditors or another audit firm in capacity of founder. An
audit firm may provide auditing services only if it employs at least one full-time licensed
statutory auditor for an indefinite period of time.
An audit firm employing only one full-time statutory auditor may not perform an audit of
financial reports of:
shareholding companies and limited liability companies whose annual income exceeds
BAM 8,000,000.00, upon expiry of one year from the affective date of this Law,
business companies and public companies whose securities are quoted on the Stock
Exchange,
banks, investment funds and companies, insurance companies, brokerage firms,
or other legal persons engaged in financial services, and for which the law governing the
conduct of these activities determines the extent of additional audit of the consolidated
report.
An audit firm shall insure itself against the risk against liability for damages that may be
caused by an incorrectly given auditor's opinion. The minimal sum of risk coverage per
adverse event shall be BAM 50,000.
For damage that may be caused to banks, leasing companies, investment and pension
funds and insurance companies by an audit firm through performing an audit, the
minimal sum of coverage per adverse event shall be BAM 500,000.
Detailed provisions governing insurance against liability for damage shall be prescribed
by the Chamber within six months of establishment date.
Article 51
The financial statement audit shall be performed by persons who have a professional title
of statutory auditor with a valid license to work in auditing of financial statements and
who are employed with an audit firm or hired by an audit firm.
A statutory auditor is an independent professional person who performs the audit and is
responsible for the correctness of the audit, preparation of audit reports and giving audit
opinions in accordance with auditing standards and the law.
For the purposes of an audit of specific areas external experts who are not statutory
auditors can be hired with the written consent of the legal person which is audited. The
Chamber needs to be notified of the engagement of external experts. Besides a statutory
auditor, persons who are not statutory auditors can be engaged in auditing as auditor
intern (pripravnik).
Article 52
An audit firm shall be selected by the legal person. The decision on the selection of an
audit firm shall be made by a body of the legal person set forth in the appropriate by-law.
An audit firm that has been selected shall not perform the audit for more than five
consecutive years from the affective date of this Law.
Exceptionally, the audit can be conducted by the same audit firm for another two years
after the timeline under paragraph 2 of this Article expires, if the audit is performed by a
different auditor.
Audit firms shall submit to the Ministry copies of contracts for auditing concluded in the
previous year no later than 15 January of the current year.
The mutual rights and obligations of the audit firm and the legal person audited shall be
regulated in a contract for auditing. The contract for auditing shall be made in writing and
cannot be cancelled for unjustified reasons. Divergence of opinion concerning accounting
and auditing between representatives of legal person audited and the audit firm shall not
be a good reason for cancelling contract to audit.
An audit firm shall not transfer contracts for auditing to another audit firm.
A fee shall be paid for an audit. The amount of remuneration shall be determined in the
contract and cannot be lower than the rates under the auditing service tariffs brought by
the Chamber with the approval of the Ministry. The tariffs shall be published in the
Official Gazettes of the Federation.
An audit firm which during performance of an audit remains without at minimum one
full-time statutory auditor employed for an indefinite period of time shall cease further
work and inform the Ministry and the legal person being audited about that change within
eight days from the day of change.
If circumstances under paragraph 1 of this Article occur, the audit firm shall not conclude
new contracts for auditing until it meets all requirements under Article 50 of this Law.
Article 53
An audit report of financial statements shall give an opinion about whether the financial
statements fairly present all substantially important respects of the financial situation and
results of operations of legal person, changes in equity and cash flows during the
accounting period covered by the audited financial statements and whether the statements
are prepared in accordance with IAS or IFRS.
Any auditors opinion must be given in accordance with ISA and can be positive, with
reservation, negative or in the form stating that the auditor has refrained from giving
opinion.
An audit report on the audit for special purpose shall be drawn up in accordance with
special regulations.
An audit report shall be drawn up and signed by a statutory auditor in his own name and
the authorized representative on behalf of audit firm.
An audit report shall be accompanied by financial statements that were subject to
auditing.
Upon an invitation by the management of a legal person or at personal request, a statutory
auditor who made an audit report can attend the meeting of the management body of the
legal person at which the report on performed audit of that legal person is considered.
Article 54
Working papers and documents created during an audit shall be confidential, owned by
the audit firm and the auditor who performed the audit and can only be used for audit
purposes and are subject to the protection and confidentiality of data.
The statutory auditor, audit firm and other people who worked and were in any way in
touch with confidential information during the audit shall not release it to any third
parties or enable them to use it. Exceptionally, it can be used by the Chamber for quality
assurance reviews. An audit firm shall allow access to any information if it is required to
determine facts in investigation or criminal proceedings. The information can be
submitted for review only at the written request by the court.
Licenses for Auditing Firms and Statutory Auditors
Article 55
The founder of an audit firm shall submit to the Ministry an application for work permit.
With the application under paragraph 1 of this Article, the founder shall submit the
following:
the decision on establishment or some other founding act,
the Articles of Association,
a by-law regulating the methodology for financial statement audits,
information on the founder(s) of the company,
information on person(s) who will take full-time employment with the audit firm for
indefinite period of time and a proof of employment of statutory and licensed auditor(s)
(photocopy of the employment contract, workers booklet and confirmation of
registration with health insurance and pension and disability insurance),
information about other auditors hired by the audit firm,
decision on registration for providing auditing services with the competent court.
If the founder of an audit firm is a foreign legal person, a legal person from Republika
Srpska or Brcko District, along with the application for issuing of work permit, in
addition to the documents under paragraph 2 of this Article, it shall also submit the
documentation proving that it has been registered for providing auditing services in its
home -country or entity or Brcko District.
On the basis of a complete and documented application under paragraphs 2 and 3 of this
Article a decision shall be made by the Minister within 30 days of submitting the
application.
When the submitted documentation shows that statutory requirements for auditing have
not been met, the Ministry shall issue a decision rejecting the application for a license.
Article 56
The Ministry shall keep the Register of Audit Firms that were granted work permits. The
Register of Audit firms shall contain the business name and address of the audit firm,
form of organisation, names of founders and their share in capital of the audit firm,
names of persons authorised to represent the audit firm and names of permanently
employed or in some other way engaged statutory auditors with licences.
Information entered into the Register of Audit Firms shall be public. All changes in
information under Article 55(2) and 55(3) of this Law shall be reported into the Register
of Audit Firms within 30 days. The Minister shall make a decision on revoking a work
permit to an audit firm in the following cases
1) If it performs a kind of auditing that is not in accordance with the provisions of this
Law,
2) If it has been granted a licence to perform the auditing tasks on the basis of false
information,
3) If it fails to act in accordance with Article 72 of this Law within the time limit
provided for;
4) If it fails to meet the requirement under Article 53(2) of this Law,
5) if it provides the auditing services to a linked legal person or if there are some other
barriers defined by the Code of Ethics in relation to that legal person, and ,
6) If it fails to insure itself in the manner prescribed by Article 50(7) and 50(8) of this
Law against liability for damage that it may cause by giving an auditor's opinion.
The decision under paragraph 5 of this Article shall be final in administrative
proceedings, but an administrative dispute against it may be initiated.
.
Article 57
The Ministry shall issue, renew and revoke the work permits/licences for performance of
financial statement auditing by the statutory auditors. The Minister shall prescribe, in a
rulebook, requirements for issuing, renewal and revoking of licences of the statutory
auditors.
The Ministry shall keep a Register of statutory auditors which were granted a license
conferring the title of statutory auditors on them in accordance with the law.
The Register of statutory auditors must include the name and surname of an auditor, the
address, identification number, name of the body that issued a certificate to statutory
auditor, the number and date of license issuance, expiry of license and other data relevant
to the proper identification of statutory auditors. Information to be entered in the Register
of statutory auditors shall be public.

Article 58
The Ministry shall make a decision on revoking of licence of a statutory auditor in the
following cases and striking off the Register:
at the request of the licensee,
if he/she provided false information when filing an application for licence,
if he/she fails to meet requirements under Article 72(3) of this Law or fails to file an
application for renewal of licence when it expired,
if he/she was fined for offences against security of payment system and transactions.
The decision under paragraph 1 of this Article shall be final in administrative
proceedings, but an administrative dispute against it may be initiated.
Conflict of interests
Article 59
An audit firm and a statutory auditor may not perform an audit at the request of a legal
person:
1) in which they are the owners of share or stocks,
2) for which they keep the account books or draw up financial statements for the
reviewed period,
3) if they are related to the legal person in any way so that objectively there is a doubt as
regards their independence and impartiality,
4) where the statutory auditor is a member of supervisory board or management or an
employee's spouse or his/her relative in direct line to the second degree,
5) If in any way, there are other factors that lead to doubts about his independence and
impartiality.
Article 60
An audit firm and a statutory auditor may not perform an audit at the request of a legal
person to which they provide the following services:
1) services related to the value assessment,
2) actuary services,
3) internal audits,
4) management and human resources services,
5) legal and expert services related to the auditing process,
6) advisory, broker, dealer or investment services.
VI. QUALITY ASSURANCE REVIEWS OF AUDIT FIRMS
AND STATUTORY AUDITORS
The Chamber of Auditors
Article 61
Audit firms, which have professional licenses granted by the Ministry, shall establish the
Chamber of Auditors. The Chamber shall be a professional organization of audit firms
and statutory auditors who operate in the territory of the Federation. The Chamber shall
be a legal person with public authority determined by this law. The Chamber shall have a
responsibility to perform tasks in the field of auditing services and other professional
areas related to audit, in particular to:
1) determine the amount of membership fee and other income,
2) care about the reputation of the auditing profession,
3) produce minimal methodology for quality assurance reviews of audit firms and
statutory auditors,
4) supervise the quality of audit firms and statutory auditors, conduct proceedings as
required and take necessary measures to eliminate irregularities found and sanction them,
notifying the Ministry thereof every six months.
Article 62
The Chamber shall be established within six months of the affective date of this Law and
within one year of the date when the Chamber was constituted it shall enact by-laws
governing the work of the Chamber.
Audit firms under Article 61 of this Law shall convene inaugural Assembly within 90
days of affective date of this Law
Article 63
The Chamber shall publish: the Articles of Association (Statute) and the Decision on the
amount of membership fees in the Official Gazette of the Federation. Pursuant to the
Articles of Association, the Chamber shall publish by-laws and other documents enacted
by the Chamber in the Chambers Journal and on the website of the Chamber.
Article 64
The bodies of the Chamber shall be: the Assembly, the Steering Committee, Chairperson
of the Chamber and other bodies of the Chamber.
Responsibilities, tasks and operation of the Chamber shall be determined by this Law and
the Articles of Association.
The Assembly shall:
1) adopt the Articles of Association with the prior approval of the Ministry and other bylaws of the Chamber,
2) issue a decision on the amount of membership fee with the prior approval of the
Ministry,
3) adopt the Code of Professional Ethics for Auditors,
4) determine the rules of the oversight and quality assurance review procedures,
5) elect members to the Steering Committee, Chairperson of the Chamber and members
of other bodies determined in the Articles of Association,
6) adopt an activity program and work plan, financial plan of the Chamber and adopt
financial statements, approve annual performance reports and submit them to the
Committee under Article 66 of this Law for consideration within 15 days of the date of
adoption by the Assembly
7) appoint members to the Commission for Oversight and perform quality assurance
review of audit firms.
The Assembly may decide on other issues as determined in the Articles of Association.
The Chamber shall be managed by the Steering Committee. The Steering Committee
shall:
1) propose work programs and development of the Chamber and monitor their
implementation,
2) propose the amount of membership fee,
3) determine the minimum form and content of auditing working papers,
4) determines the minimum methodology for quality assurance reviews,
5) perform other professional tasks and services associated with the development of the
auditing profession in accordance with the Articles of Association of the Chamber,
6) give members of the Chamber expert opinions and explanations, if they so request,
7) enact by-laws and documents in accordance with the Articles of Association (Statute),
perform other tasks defined in the Articles of Association of the Chamber.
Quality Assurance Review
Article 65
The Chamber shall perform quality assurance reviews of audit firms and statutory
auditors to verify whether they do business and perform audits in accordance with this
Law, the ISA and other rules of the auditing profession.
The Chamber shall perform quality assurance reviews of the audits and audit reports,
contracts and remuneration for audits, assess the internal control system evaluating the
quality of the audit firm, check ownership and management structures, control
recruitment of statutory auditors and examine other areas in accordance with the
provisions of this Law (hereinafter : Quality assurance reviews).
The Chamber shall perform a quality assurance review of audit firms and auditors who
conduct audit of legal persons of public interest and of other legal persons at least once
every three years or at least once every six years respectively.
Prior to the commencement of a quality assurance review, the Chamber shall notify the
audit firm in writing.
Quality assurance reviews under paragraph 1 this Article shall be carried out by a
Commission appointed by the Assembly of the Chamber, whose members are statutory
auditors with a minimum of five years experience in auditing. The appointment of
members of Commission shall be carried out in an objective way to prevent conflicts of
interest between the people who perform a quality assurance review and the audit firm
that is subject to review. The Commission shall report to the Assembly.
Upon completion of the review a report shall be made to contain findings and opinions of
the completed review.
If in the course of a review irregularities were found in the performance of audit firm and
statutory auditors, the report under paragraph 6 of this Article shall contain an order to
remove irregularities and a deadline for removal.
The audit firm and statutory auditors are entitled to file a written objection to the report
made within eight days of receipt. The Chamber shall decide it within three days of
receipt.
If an audit firm and statutory auditors fail to comply with the order for removal of
irregularities, the Chamber shall submit a proposal to the Ministry for a license/work
permit revocation and striking off the Register of Audit Firms.
Public oversight
Article 66
Public oversight of the Chamber, audit firms and statutory auditors shall be conducted by
the Public Oversight Board (hereinafter: the Board).
The Board shall have five members appointed and dismissed by the Government of the
Federation on the proposal of the Minister. The Board shall make decisions by consensus.
The members of the Board shall be experts in the field of auditing that are knowledgeable
in this area and who are not professionally engaged in conducting audits.
The Board shall oversee:
1) the registration of audit firms,
2) the adoption of standards of professional ethics, internal quality control of audit firms
and auditing
3) implementation of permanent training, quality assurance and a system of discipline.
The Board shall also oversee the following:
1) the legality of performance and actions of the Chamber,
2) the effectiveness, efficiency and purposefulness of the Chamber,
3) internal structure and organization of the Chamber and members competence to carry
out responsibilities of the Chamber,
4) the relationship of members of the Chamber with audit firms and statutory auditors and
other parties.
The Board shall cooperate with the supervisory authorities in the Republika Srpska,
Brcko District, European Union member states and third countries, especially in cases of
determining certain irregularities in the actions of audit firms and statutory auditors.
If needed, the Board shall conduct a subsequent audit of audit firms, and, if necessary
according to the findings, shall undertake specific measures and actions and inform the
Ministry thereabout regularly.
Funds for activities of the Board shall be provided in the Budget of the Federation of
Bosnia and Herzegovina.
A program of activities and financial plan for the coming year shall be submitted to the
Government of the Federation by the Board not later than 31 December of the current
year, while a report on the activities for the previous financial year and the execution of
financial plan, together with the Activity Report of the Chamber, shall be submitted for
consideration and approval through the Ministry by 31 March of the current year.
The program of activities and Activity Report shall be published on the website of the
Ministry and the Government of the Federation
Article 67
In order to implement public oversight, if necessary, the Board may seek appropriate
reports and information about the work and completed tasks of the Chamber.
If in the implementation of public oversight the Board determines that there are certain
violations and irregularities in the work of the Chamber it shall take the following
actions:
1) request a report and other information about the detected irregularities,
2) propose measures to correct them,
3) take other measures within its competences to conduct public oversight
Article 68
Upon the proposal of the Chamber and with the prior consent of the Board, based on
needs carried out during the subsequent inspection and findings, the Ministry shall issue a
decision on striking off the Register of Audit Firms and on declaring license/work permit
invalid:
1) if, on the basis of the report on a quality assurance review, it was determined that an
audit was not carried out in accordance with this Law and its by-laws, IAS, Code of
Professional Ethics for auditors and the accompanying instructions and explanations
issued by IFAC,
2) if a work permit/license was issued based on false information given by founder ,
3) if the statutory auditor with a valid license who is employed in the company and
provides audit services has quitted,
4) If it fails to insure itself against liability for damage that can be caused by an auditors
opinion,
5) If it performs auditing duties during the period of time when the audit firm was
temporarily ineligible for audits or otherwise violates measures imposed.
The decision under paragraph 1 of this Article shall be published in the Official Gazette
of the Federation. This decision cannot be appealed against, but an administrative dispute
can be instituted.
VI. PENAL PROVISIONS
Article 69
1. A legal person shall be fined by BAM 5,000.00 to 15,000.00 for an offence if:
it fails to open account books, compose accounting documents, control accounting
documents before entering them into account books, keep account books and/or close
account books in accordance with Articles 14 through 24 of this Law,
it fails to retain accounting documents and account books in accordance with Articles 31
through 32 of this Law,
it fails to take inventory of assets and liabilities in accordance with Articles 25 and 26 of
this Law;
d) fails to respond to the request from a statutory auditor for confirmation by the deadline
under Article 28(4) of this Law
e) fails to retain annual financial reports by the deadline and manner under Article 31 of
this Law,
f) fails to draw up consolidated financial reports and/or fails to store consolidated
financial reports by the deadline and manner under Article 31 and 43 of this Law
g) fails to retain audit reports by the deadline and manner under Article 31 of this Law,
h) it fails to compose an annual report on business activity in accordance with Articles
40 and 41 of this Law,
i) it fails to submit financial reports and annual reports on business activity and auditors
opinion if it is obliged to have its annual financial reports audited and other documents to
the authorized institution under Article 44 of this Law,
j) it fails to enable the authorised person to exercise oversight in accordance with Article
48 of this Law,
k) fails to remove deficiencies found and fails to inform the Tax Administration thereof
in accordance with Article 47 of this Law.
The responsible person within a legal person shall be fined by BAM 500.00 to 3,000.00
for an offence under preceding paragraph of this Article
2. A legal person shall be fined by BAM 10,000.00 to 15,000.00 for an offence if::
fails to draw up and present annual financial reports under Article 33 of this Law
applying IFRS,
fails to submit annual financial reports on forms provided for in Articles 36 and 39 of this
Law,
fails to ensure to have its financial reports audited under Articles 49 and 52 of this Law
and/or revise its financial reports in compliance with the auditors opinion
The responsible person within a legal person shall be fined by BAM 500.00 to 3,000.00
for an offence under preceding paragraph of this Article.
3. An audit firm shall be fined by BAM 5,000.00 KM to 15,000.00 for an offence if:
it provides auditing services contrary to provisions of Article 50(5) and 50(6) of this Law,
auditing services are provided by persons in the audit firm who does not meet
requirements under Article 51 of this Law,
it provides auditing services contrary to provisions of Article 60 of this Law,
it sub-contracts for auditing contrary to Article 52(6) of this Law,
it fails to retain working documentation in the manner under Article 32 of this Law,
it violates the obligation to keep information confidential in accordance with Article 54
of this Law,
it fails to draw up audit reports in the manner under Articles 49(1), 49(2) and 53 of this
Law,
it fails to insure itself in the manner under Article 50(7) and 50(8) of this Law,
it fails to act in accordance with Article 65 of this Law while the Chamber performs a
quality assurance review,
The responsible person within an audit firm shall be fined by BAM 500.00 to 3,000.00
for an offence under preceding paragraph of this Article.
4. An audit firm shall be fined by BAM 5,000.00 to 15,000.00 for an offence if statutory
auditors audit legal persons contrary to provisions of Article 60 of this Law.
The responsible person within an audit firm and the statutory auditor shall be fined by
BAM 500.00 to 3,000.00 for an offence under preceding paragraph of this Article.
5. A statutory auditor shall be fined by BAM 1,500.00 for an offence if:
he violates the obligation to keep information confidential in accordance with Article 54
of this Law,
he draws up and signs an audit report that is not drawn up in the manner under Articles
49(1), 49(2) and 53 of this Law, or if he fails or incorrectly assesses some significant
items in financial statements that were audited, or if he fails to apply auditing rules,
which has the effect of misleading financial statements, or wrong explanations of
findings,
he fails to notify the audit firm about the occurrence of conflict of interest in accordance
with Article 59 of this Law..
6. The Chamber shall be fined by BAM 2,500.00 to 7,500.00 for an offence if:
it fails to discharge tasks provided for in Article 61 of this Law,
it fails to ask for approval of the Articles of Association from the Ministry, as provided
for in Article 64(3)(6) of this Law,
it fails to perform a quality assurance review of an audit firm at least once in six
months/three years in accordance with Article 65(3) of this Law.
The chairperson of the Chamber shall be fined by BAM 500.00 to 1,500.00 for an offence
under preceding paragraph of this Article.
VII. TRANSITIONAL AND FINAL PROVISIONS
Article 70
Persons who have acquired professional titles until the affective date of this Law in
accordance with the Accounting and Audit Law of the Federation of Bosnia and
Herzegovina ("Official Gazette of the Federation of BiH", 32/05) shall have their
acquired qualifications recognised.
Article 71
Persons who have started the procedure of taking exam until the affective date of this
Law under the programme of the Commission shall continue taking exam and acquiring
the title under that programme, and shall have their passed exams and acquired titles
recognized.
Article 72
Audit firms that until the effective date of this Law have obtained the work permit from
the Ministry shall harmonize its status and business operations with the provisions of this
Law no later than within 180 days of effective date of this Law and submit to the
Ministry documents (papers) as evidence confirming that they meet requirements for
work in accordance with provisions of this Law.
Any application for issuing of work permit to an audit firm that was filed before the
effective date of this Law shall be decided in accordance with provisions of the law
applicable at the time of its filing, the audit firm being obliged to finish the harmonisation
under paragraph 1 this Article within the prescribed period.
Statutory auditors, who got licenses from the Ministry before effective date of this Law,
shall apply to the Ministry for renewal of licence within 90 days of the effective date of
this Law.
Certified accountants, who have valid licenses and provide accounting services to third
parties and are registered as self-employed persons, shall harmonize their status and
business operations with Article 24(2) of this Law within a year of the effective date of
this Law.
Article 73
The Association of Accountants, Auditors and Financial Workers of the Federation of
Bosnia and Herzegovina, registered with the Federal Ministry of Justice under the
registration number 669 on 14 May 2003 shall be deemed to be a professional body for
the purpose of this Law, provided that it meets the criteria set forth in this Law and the
Auditing and Accounting Law of Bosnia and Herzegovina.
For the purpose of this Law, the Association of Auditors of the Federation of Bosnia and
Herzegovina, registered with the Federal Ministry of Justice under the registration
number 04-05-2-1909/01 on 13 May 2005, shall be considered a professional body,
provided that it meets requirements set forth in this Law and the Auditing and
Accounting Law of Bosnia and Herzegovina
Article 74
Within six months of the effective date of this Law, the Minister shall enact the
following:
- The Framework Chart of Accounts and Rulebooks on Its Application (Article 21(2) of
this Law),
- The Rulebook on the Content and Form of Financial Statements (Article 39(1) of this
Law).
The Minister shall enact the Rulebook on Issuing, Renewal and Revoking of Licences of
the Statutory Auditors and Audit Firms under Article 57(2) of this Law within 60 days of
the effective date of this Law.
Article 75
Until enactment of by-laws on the basis of authorizations under this Law, the by-laws
enacted on the basis of the Law that the Minister shall repeal upon entry into force of this
Law shall apply.
Article 76
As of the effective day of this Law, the Accounting and Auditing Law of the Federation
of Bosnia and Herzegovina ("Official Gazette of the Federation of BiH", 32/05) shall be
repealed.
Article 77
This Law shall come into effect on the eighth day of publishing in "Official Gazette of
Federation of BiH ", and shall apply as of 1 January 2010.
SPEAKER
House of Representatives
Federation of BiH Parliament
Safet Softi
SPEAKER
House of Representatives
Federation of BiH Parliament
Stjepan Krei

Accounting and Auditing Law in Federation Bosnia and Herzegovina

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Accounting and Auditing Law in Federation Bosnia and Herzegovina

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The translation of BiH legislation has no legal force and should be used solely for informational purposes.

Only legislation published in the Official Gazettes in BiH is legally binding.

Statutory auditor is a person holding a license issued by the Federation Ministry of

Program can be provided by any legal person, professional body or educational

dispatch documents, delivery tickets etc.).

records shall be business events that have the following characteristics:

of statutory auditors shall be public.

The Chamber of Auditors

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